Bills Digest no. 122 2006–07

Safety Rehabilitation and Compensation and Other
Legislation Amendment Bill 2006

WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.

The purpose of
the Safety, Rehabilitation and Compensation and Other Legislation
Amendment Bill 2006 (the Bill) is to amend the Safety,
Rehabilitation and Compensation Act 1988 (the SRC Act) - which
is the legislative basis for the Commonwealth workers compensation
scheme - so as to:(1)

substantially tighten the connection which a disease must have
with an employee s employment

amend the definition of injury to exclude injuries arising from
reasonable administrative action taken in a reasonable manner

remove claims for injuries which occur travelling to and from
the work place, and also during work recess breaks not taken at the
workplace

amend the calculation of retirees incapacity benefits to take
account of changes in interest rates and superannuation fund
contributions

update measures for calculating benefits for employees,
including the definitions of normal weekly earnings and
superannuation scheme

ensure that all potential earnings from suitable employment can
be taken into account when determining incapacity payments

enable authorities to directly reimburse health care providers
for the cost of their services to injured employees, and

increase the maximum funeral benefits payable.

The Bill also includes minor technical
amendments to the SRC Act, including a substantial number of
consequential amendments to the Legislative Instruments Act
2003, which commenced on 1 January 2005.

In addition, an amendment to the funeral benefit
provisions of the Military Compensationand
Rehabilitation Act 2004 is proposed to maintain parity with
benefits under the SRC Act.

The SRC Act is the legislative basis for the
Commonwealth workers compensation scheme. It establishes and
regulates the scheme for compensating and rehabilitating
Commonwealth workers who are injured either out of or in the course
of their employment.(2) The Act was designed to be
beneficial in its application and operates as a no-fault
scheme.

The SRC Act applies to injured Commonwealth
workers (except members of the Australian Defence Force, who are
covered by separate legislation) regardless of the State or
Territory they work in. A Commonwealth employee is limited to
compensation under the SRC Act and does not have entitlements under
State or Territory workers compensation schemes. The SRC Act also
applies to non-Commonwealth employees where the employer
corporation is licensed under s.103 of the SRC
Act.(3)

In his first and
second reading speeches of the Bill in 2006, the then Minister for
Employment and Workplace Relations, Kevin Andrews, MP explained the
main basis for the proposed amendments as being:

primarily to maintain the financial viability of
the Commonwealth workers compensation scheme and to improve the
administration and provision of benefits under the scheme. The
scheme has come under added pressure in recent years from
increasing numbers of claims, longer average claim duration and
higher claim costs.(4)

The Minister also attributed the rise in costs
(in part) to:

court interpretations of the legislation, some of which have
departed from the initial intent of the legislation(5)
[and have] expanded the scope of the scheme, beyond what was
initially intended by the previous government and agreed by this
parliament. (6)

Nevertheless,
there are some concerns that the amendments in the Bill are not as
consistent with the original purpose as the Government
suggests.

In his second reading speech on 27 April 1988,
the then Minister for Social Security, Brian Howe, MP, made a
number of points in relation to the object and purpose of the
formerly named Commonwealth Employees Rehabilitation Bill 1988
(subsequently re-named the SRC Act). The then Minister stated
that:

Benefits Package

The main aspects of the new scheme are a better
range of benefits for injured employees. The benefits package is
aimed specifically at assisting those employees most in need - that
is, the long-term incapacitated workers.

The required work injury nexus

Under the [pre-1988] Act an employee is required
to establish only that his or her employment was a contributing
factor in the contraction of a disease. This test does not
adequately reflect the rights and obligations of the Commonwealth
and its employees in relation to work-related disease and
frequently results in the Commonwealth being liable to pay
compensation for diseases which have little, if any, connection
with employment. This Bill seeks to remedy that situation by
requiring an employee to show that his or her employment
contributed in a material degree to the contraction of the
disease.

An employee will not be required to show that his
or her employment caused the disease, or even that it was the most
important factor in the contraction of the disease. It is intended
that the test will require an employee to demonstrate that his or
her employment was more than a mere contributing factor in the
contraction of the disease. Accordingly, it will be necessary for
an employee to show that there is a close connection between the
disease and the employment in which he or she was engaged.

Introduction of journey and recess break
claims

The Bill will extend coverage to employees injured
during ordinary recesses, such as lunch breaks [ ]. The journey
provisions [would require] that journeys to or from the place of
employment must commence or terminate at the employee s place of
residence.

The financial impact statement contained in
the Explanatory Memorandum to the current Bill, estimates that the
amendments to the SRC Act will bring about a reduced call on
Comcare s premium pool of approximately $20 million per annum.
(7)This reduction on the premium pool may have a
positive impact on the premiums for workers compensation under the
Comcare scheme.

It is expected that the amendments to the
definitions of injury and disease in the SRC Bill will yield
savings of $5 million per annum to Comcare s premium pool. Along
with these savings to the premium pool, it is expected that the
amendments will also bring about savings of $1.8 million per annum
to self-insurers under the Commonwealth workers compensation
scheme.

It is anticipated that the amendments to the
treatment of recess break claims and journey claims will also
result in savings of $15 million per annum to Comcare s premium
pool along with savings of $5.4 million per annum to self-insurers
under the scheme.

As can be seen, these net savings will be
shared amongst self-insurers under the scheme and all Commonwealth
agencies and departments covered by Comcare.

Item 9 of the Bill amends the definition of
suitable employment and expands its capture so
that an employee s capacity to work outside Commonwealth employment
(or employment by a licensed corporation) may also be considered
when calculating their weekly incapacity payments payable under
section 19 of the SRC Act.

Where a non-retired employee has suffered an
injury and the injury results in incapacity, subsection 19(2) of
the SRC Act provides a formula for calculating the weekly
compensation of an incapacitated employee. Basically, the
calculation involves deducting the greater of either the amount the
employee is able to earn in suitable employment ,
or is actually earning, from the employee's normal weekly
earnings.

Section 4(1) of the SRC Act defines
suitable employment in relation to a person who has
suffered an injury in respect of which compensation is payable to
mean:

(a)in the case of an
employee, who was a permanent employee of the Commonwealth or a
licensed corporation (at the date of injury) and who did not
subsequently voluntarily terminate their employment work
for which the employee is suited having regard to four
tests(8).

(b)in any other
case (eg Resignations; deemed resignations through failure
to attend work; voluntary redundancies ) any employment
(including self-employment) having regard to the same four tests
used for employees in paragraph (a).

The significance of being placed in category
(a) as opposed to category (b) lies in the fact that category (a)
allows account to be taken only of employment with the Commonwealth
(or a licensed corporation) whereas paragraph (b) takes account of
employment in the general labour market and self-employment. This
is consistent with the intention of the government and the
Parliament in 1988. In his second reading speech on 27 April 1988,
the then Minister for Social Security, Brian Howe, MP stated
that:

Suitable employment for an employee who is
permanently employed by the Commonwealth will mean employment by
the Commonwealth or a statutory authority.

The targets of the proposed amendment

Under the current legislation, where it is the
Commonwealth (or a licensed corporation) that is responsible for
terminating a permanent employee s employment (eg
through invalidity retirement, retrenchment or some other method)
and the employee otherwise satisfies the definition in paragraph
(a)(9) then they will be placed in category
(a)(10) as the initial step toward determining what
qualifies as suitable employment . Thus in such
circumstances, the courts have held that suitable
employment continues to mean suitable employment with the
Commonwealth (or licensed corporation). This is arguably both
logical and appropriate given that the reason for the permanent
employee s termination from their employment arises not from any
action or omission on their part.

The Explanatory Memorandum suggests that the
practical effect of limiting the ambit of what counts as
suitable employment for such employees is to
provide a disincentive for those employees to seek other employment
as they may simply rely on the maximum compensation
benefit.(11)

The proposed amendment to the definition of
suitable employment will not only enable Comcare
to take into account both actual and potential
earnings when calculating amounts that may be realised
from employment with the Commonwealth (or licensed corporation) or
any other type of employment; it will also assist the employer in
their duty under section 40 of the SRC Act in helping an employee
to find suitable employment outside the Australian Public Service.
This has been a particular problem in regional areas where
Commonwealth employment opportunities have been limited and so
assisting the employee in returning to employment which is one of
the main objects of the SRC Act has been frustrated by the current
exclusion of non-Commonwealth employment from the current
definition of suitable employment . This proposed amendment seeks
to address this problem and deliver with it the positive benefits
of having an employee return to the workforce.

This amendment expands the definition of a
superannuation scheme to include a
retirement savings account.

Under subsection 4(1) of the SRC Act,
superannuation scheme means any superannuation
scheme under which the Commonwealth, a Commonwealth authority or a
licensed corporation makes contributions on behalf of
employees.

Sections 20, 21 and 21A of the SRC Act
currently operate to reduce the weekly amount of compensation
benefits accordingly, where an injured and retired employee is a
member of a superannuation scheme and they are in receipt of a
superannuation benefit.

However, where an employee is in receipt of
superannuation payments from a non-defined superannuation scheme,
then those payments are not captured by the current definition of
superannuation scheme and thus are not taken into account.

The essential information to be imparted by an
employee presenting a claim for compensation under the SRC Act, are
[details of] the nature of the injury or [disease] and its
connection with the employment.(12) However, under the
SRC Act, the amount and type of compensation that an employee is
entitled to receive does not turn on whether an employee has
suffered a work-related injury as opposed to a work-related
disease. Rather, the relevance of providing details of the nature
of the injury or disease stems from their different legal meanings,
resulting in different legal consequences, in terms of the
different evidentiary requirements necessary to establish a work
related injury as opposed to a work related disease
.(13)

Thus, where an employee suffers an
injury within the protected period of employment, it is ordinarily
compensable without proof of a specific causal connection with the
worker s employment .(14) In contrast, where an employee
suffers a disease, at work or otherwise, the disease is only
compensable if the employment in which the employee was engaged
contributed in a material degree to the contraction of the
disease.(15)

Item 11 creates new tighter
definitions of injury and disease
(in new sections 5A and 5B respectively) that are
designed to deliberately restrict the circumstances under which an
employee is entitled to compensation under the SRC Act.

These new definitions of
injury and disease replace the
existing definitions under subsection 4(1) of the SRC Act.

New Section 5A Definition of
injury

Operating as an absolute defence, the SRC Act
contains five exclusionary provisions,(16) the
successful operation of any one of which may serve to defeat an
employee s claim for compensation that otherwise satisfies the
entitlement provisions within the SRC Act.

Two of these exclusionary provisions are
contained in the existing definition of injury under the SRC Act.
Injury means:

(a) a disease suffered by an employee; or

(b) an injury (other than a disease) suffered by
an employee, being a physical or mental injury arising out of, or
in the course of, the employee's employment; or

(c) an aggravation of a physical or mental injury
(other than a disease) suffered by an employee (whether or not that
injury arose out of, or in the course of, the employee's
employment), being an aggravation that arose out of, or in the
course of, that employment;

Injury does not include:

any such disease, injury or aggravation
suffered by an employee as a result of reasonable
disciplinary action taken against the employee or
failure by the employee to obtain a promotion, transfer or
benefit in connection with the employee s
employment.(17) [Emphasis added]

The purpose of the new subsection
5A(1) is to clarify that the exclusions are to be extended
to all reasonable management activities.

Under the proposed subsection
5A(1) the definition of injury does not
include a disease, injury or aggravation suffered as a
result of reasonable administrative action taken
in a reasonable manner in respect of an employee s employment.

What is captured under the rubric of
reasonable administrative action?

The new subsection 5A(2)
lists a range of matters that may fall within the term
reasonable administrative action . These include
but are not confined to the following:

(a) a reasonable
appraisal of the employee s performance;

(b) a reasonable
counselling action (whether formal or informal) taken in respect of
the employee s employment;

(c) a reasonable
suspension action in respect of the employee s employment;

(d) a reasonable
disciplinary action (whether formal or informal) taken in respect
of the employee s employment;

(f) anything
reasonable done in connection with the employee s failure to obtain
a promotion, reclassification, transfer or benefit, or to retain a
benefit, in connection with his or her employment.

The Law Council of Australia has raised
concerns over the clarity of the provision. They have offered the
following opinion:

The extension of the exclusionary provision to
reasonable administrative action takes this exclusion too far. On
one interpretation, it might be considered that all Government
actions (and not just disciplinary ones) can be regarded as
administrative action . Another danger of excluding all injuries
arising from all reasonable administrative action under a no fault
scheme is that certain judgements about fault must be imported. The
basic premise upon which various Australian workers compensation
schemes are based is that reasonableness of a particular action or
omission is excluded (hence, the term 'no-fault'). The aim
historically was to provide workers with a defined benefit in the
event of incapacity. Questions of fault have historically been
handled by the courts.(18)

The Explanatory Memorandum states that a
number of court and tribunal decisions have given the term
disciplinary action a very narrow interpretation,
largely confining its meaning to formal disciplinary action, or
action pursuant to an award or certified agreement. Such decisions
are argued to impact on the capacity for legitimate management
action. They have also increased the potential financial liability
of the scheme by enabling successful claims to be made for injuries
(usually psychological injuries) arising out of circumstances which
were not intended to have been covered by the SRC Act. Hence the
following circumstances have been found not to constitute
disciplinary action:

investigations to determine whether a probationary appointment
should be annulled

investigations to determine whether formal proceedings should
be instituted, and

management counselling.(19)

The Explanatory Memorandum offers two cases by
way of illustrative examples.(20)

In Re Tan and Comcare (1997), the Administrative
Appeals Tribunal (AAT) held that a session described as a
counselling session was not counselling but a preceding step, a
discussion, an investigation of complaints , which did not attract
the disciplinary action exclusion. In Re Murray and Comcare (1998),
the AAT held that disciplinary action did not include
investigations undertaken prior to formal disciplinary action under
section 61 of the Public Service Act 1922.

It is noteworthy that while the Tribunal in
Re Tan and Comcare held that a counselling session did not
attract the exclusion, in the case of Re Murray and
Comcare a counselling session was considered to fall within
the terms of disciplinary action. Furthermore, the decision by the
AAT in Re Murray and Comcare not to include investigations
undertaken prior to formal disciplinary action under section 61 of
the Public Service Act is perhaps appreciated in a
different light with slightly more context given to it. In Re
Murray and Comcare the AAT held that:

An investigation of a grievance is not
disciplinary action. That investigation may lead to the Secretary s
forming an opinion at a later time that an officer has failed to
fulfill his duty as an officer and decide to take disciplinary
action. Until the Secretary does that, there is no disciplinary
action.

Until recently, a leading authority on the
term disciplinary action was the Federal Court
decision Comcare v Chenhall (1992) 37 FCR at 75. In
Chenhall Cooper J held that the action taken to determine
whether or not disciplinary action will be taken against an
employee, although it may be characterised as part of a system or
process to maintain discipline, is not action within the meaning of
the definition. The decision in Chenhall meant that unless
disciplinary action had been formerly commenced, the exclusion
would not apply. Until recently, it was not uncommon for hearings
at the AAT to be determined dependant on whether the formal process
of disciplinary action had actually commenced.

However, in the more recent decision
of Hart v Comcare (2005), the Full Court of the
Federal Court seems to challenge this position. In Hart,
Branson, Conti and Allsop JJ accepted the single Judge decision of
Whitlam J in the first instance, finding that the Tribunal drawing
a distinction between the process behind a promotion, and the
promotion itself, was spurious. Although the Hart decision
related to a failure to obtain a promotion, it is likely that the
principle in Hart will apply equally to other exclusionary
provisions such as reasonable disciplinary action.

Following the decision in Hart, the
interpretation of the ambit of the exclusionary provisions will
likely be extended to apply to the process behind reasonable
disciplinary action. However, for the process behind the
disciplinary action to be exclusionary, the contributing factors
which caused the injuries must form part of the disciplinary
action, and not be determined by a Tribunal or Court to be
something other than disciplinary action.

As with reasonable disciplinary action
discussed above, the principles in Chenhall and
Hart apply.

The Hart decision has effectively
removed the distinction between promotion, transfer and benefit and
the process leading to promotion, transfer and benefit. An employee
who suffers an injury as a result of the process behind the
promotion, transfer or benefit will likely be excluded from an
entitlement to compensation under the SRC Act.

Historically, the Courts have been inclined to
read the word obtain with regard to failure to obtain a promotion,
transfer or benefit strictly.

In Re Davill and Australian Postal
Corporation (1995) the restructure of the employee s workplace
meant that the employee faced a downgrading in the position and
this was a large contributor to the development of a depressive
illness. The AAT held that the injury suffered as a result of this
was not caught by the exclusion. It was held that:

It could not be said that the downgrading of the
Applicant s position was a failure to obtain a benefit.

The Tribunal found that the word obtain could
not be reasonably extended so as to include the retention of a
benefit.

The Federal Court in Comcare v Ross
(1996) FCA 680 did not set aside a Tribunal decision where the
Tribunal found that the word obtain did not mean retain, but rather
had a commonsense meaning of to acquire . In Ross Finn J
said, by way of obiter dictum, that it is wholly reasonable to
assign the ordinary meaning to the word obtain . Tribunal decisions
have since accepted the obiter in Ross and held that the
failure to retain a promotion, transfer of benefit
does not come within the exclusionary provision.

The operation of the new subsection
5A(2) and the non-exhaustive list of matters that it
contains may have the effect of reducing the success of claims such
as those above.

New Section 5B Definition of
disease

Under subsection 4(1) of the current SRC Act,
disease means any ailment
suffered by an employee, or the aggravation of any such ailment
that was contributed to in a material degree by
the employee s employment by the Commonwealth or licensed
corporation. Ailment means any physical or mental ailment,
disorder, defect or morbid condition (whether of sudden onset or
gradual development).

In his first and second reading speeches of
the Bill in 2006, the Minster for Employment and Workplace
Relations, Kevin Andrews, MP expressed concern that:

the scheme has come under added pressure in recent years from
increasing numbers of claims, longer average claim duration and
higher claim costs.(21)

[and] this is in part a result of court interpretations of the
legislation, some of which have departed from the initial intent of
the legislation(22) [and have] expanded the scope of the
scheme, beyond what was initially intended by the previous
government and agreed by this parliament. (23)

The Explanatory Memorandum re-states this
concern.

The original
intention of the legislation in 1988 is gauged by reference to the
Second Reading Speech to the Commonwealth Employees
Rehabilitation Act 1988 (subsequently re-named the SRC Act).
The intention was to avert and redress a situation of the
Commonwealth being liable to pay compensation for diseases which
have little, if any, connection with employment . This resulted in
the introduction of a test that required a claimant to show that
their employment contributed in a material degree to the
contraction of the disease.

The then Minister
also explained that:

An employee will not be required to show that
his or her employment caused the disease, or even
that it was the most important factor in the
contraction of the disease. (Emphasis added)

It is intended that the test will require an employee to
demonstrate that his or her employment was more than a mere
contributing factor in the contraction of the disease.
Accordingly, it will be necessary for an employee
to show that there is a close connection
between the disease and the employment in which he or she
was engaged. (Emphasis added)

In determining whether employment contributed in a material
degree to the contraction of the disease in a particular case,
regard would be had to whether the employment in which the employee
was engaged carried an inherent risk of the employee contracting
the disease in question and whether some characteristic or feature
of the employment tended to cause, aggravate or accelerate the
disease.

The Explanatory Memorandum points out that the
courts have been inclined to read down the expression
contributed to in a material degree so as to
emphasise the causal connection between the employment and the
condition complained of rather than the extent of the contribution
that an employee s work has made to the development of the disease.
Hence, the aim of this proposed amendment is to redress the
apparent diversion from what is the actual intended policy behind
the SRC Act denying claims for diseases to which an employee s work
has only made a minor contribution.(24)

The proposed
amendment to the definition of disease is informed by the 2004
report of the Productivity Commission on the National
Workers Compensation and Occupational Health and Safety
Frameworks. In that report, the Productivity Commission
reflected on the fact that jurisdictions, to a varying degree, also
include a test of the degree of contribution to the illness or
injury from employment, and recommended a strengthening between the
required causal connection and an employee s employment and the
contraction or aggravation of a disease be strengthened.
(25)The Explanatory Memorandum anticipates that this
would result in a benefit for self-insurers by reducing the
incidence of compensable claims, thus offering the possibility for
a reduction in worker s compensation costs.(26)

Where an incapacitating condition is shown,
the inability to precisely identify and name a compensable disease
is not absolutely necessary;(27) however, it may be a
factor which mitigates against a finding of a causal link with
employment, but is not necessarily an insuperable obstacle to such
a finding.(28)

There is also a need to establish that in
doing work, the employee was exposed to a state of affairs to which
they would otherwise would not have been exposed or to some
characteristic or condition in which the work was to be performed
and that this was a contributing factor to the condition complained
of.(29)

Until recently the leading authority as to
what constitutes material contribution was the
Full Court of the Federal Court decision of Treloar v
Australian Telecommunications Commission (1990). This is
despite the fact that Treloar s case was expressly limited
to a consideration of the 1971 Act in which the word material did
not appear. The Full Court in Treloar held:

The use of the word material in conjunction with
the words contributing factor in the legislation, where it has
occurred in expositions of the section in other cases clearly is
not intended to add to the section any significance which is not
already to be found in the words used by the legislature. It has
served only to emphasise that the section is not brought into play
unless it be established by evidence that features of the
employment did in fact and in truth contribute to the condition
complained of. The causal connection must be established on the
probabilities and not left in the area of possibility or
conjecture. Once the link is established, however, it matters not
that the contribution be large or small.

In my opinion it was open on the evidence for the
Tribunal to hold that one or more of the incidents or states of
affairs about which Mr Wiegand raised complaint in the course of
his evidence contributed in a material degree to an aggravation of
the depressive disorder suffered by Mr Wiegand. For that to be the
case there is no requirement at law that the interpretation placed
on the incident or state of affairs by the employee, or the
employee's perception of it, is one which passes some qualitative
test based on an objective measure of reasonableness. If the
incident or state of affairs actually occurred, and created a
perception in the mind of the employee (whether reasonable or
unreasonable in the thinking of others) and the perception
contributed in a material degree to an aggravation of the
employee's ailment, the requirements of the definition of disease
are fulfilled.

The decision of the Federal Court in
Wiegand means that if an employee has a perception of a
state of affairs and that state of affairs actually occurred, then
the employee s condition is compensable if the state of affairs
materially contributed to the employee s condition,
regardless of other contributing factors.

More recently, the term material
contribution was considered in the Full Court of the
Federal Court decision Comcare vCanute (2005)
FCAFC 262. On 16 December 2005 the majority in Canute,
French and Tone JJ, held:

On this basis, the observations of the Full Court
in Treloar at 323 that the relevant causal connection must be
established on the balance of probabilities and not left in the
area of possibility of conjecture are not controversial. Equally,
it is plain that the present legislation was not intended to
require that an employee demonstrate that their employment caused
the disease or that it was the most important factor. It would also
appear that the imposition of a 'but for' test remains
inappropriate. Having said this, the changes brought about by the
enactment of the SRC Act were intended to require that the
contribution be 'more than a mere contributing factor' and, as
such, the comments of the Court in Treloar must be assessed in this
light. Content must be given to the word 'material' contained in
the definition of 'disease' in the legislation as it presently
stands. The inclusion of this term imposes an evaluative threshold
below which a causal connection may be disregarded. However, it is
not necessary for present purposes to consider the proper meaning
of 'material' and nothing more need to said about this issue.

The majority in Canute have tightened
the test in Treloar to require that the employee s
employment must be more than a mere contributing factor to satisfy
the requirement of material contribution .

In summary, for a disease to be compensable
under the SRC Act, the employment of the injured worker must be
found to have materially contributed to the disease, that is, there
must be a link between the disease and the employment
(Treloar) and the contribution must be more than a mere
contributing factor (Canute).

Notwithstanding the fact that the law as it
currently stands appears to conform with the original legislative
intent, it would appear that the proposed amendment is driven by a
desire to leave no room for doubt. However, the strength of the
wording in the proposed amendment noticeably goes beyond the
original legislative intent (see below).

The proposed amendment in the current Bill
purports to achieve this same state of affairs by defining
disease to mean an ailment
suffered by an employee, or an aggravation of such an ailment that
was contributed to, to a significant degree by the
employee s employment by the Commonwealth or licensed corporation
.

Subsection 5B(3) defines
significant degree to mean a degree that is
substantially more than material .

New subsection 5B(2) contributed to, to a
significant degree

This subsection provides a non-exhaustive list
of factors that may be taken into account in determining whether an
ailment or aggravation was contributed to, to a significant degree,
by an employee s employment by the Commonwealth or a licensee.

(a) the duration of the employment;

(b) the nature of, and particular tasks involved
in, the employment;

(c) any predisposition of the employee to the
disease;

(d) any activities of the employee not related to
his or her employment; and

It is interesting to note that the term
disease is no longer defined to mean any ailment
but rather an ailment. It is unclear as to whether this change is
benign or whether it may signal - at least tacitly - a restriction
on what diseases may be claimed. If the latter is the case, then it
represents an interesting pre-judgement of events and implicitly
alters the beneficial and no-fault nature of the scheme.

The requirement that an ailment or its
aggravation be contributed to, to a significant
degree , which means a degree that is
substantially more than material cannot be so
easily reconciled with the intention of the Parliament as expressed
in the Second Reading Speech in 1988 (see above).

A number of submissions to the Senate Inquiry
into the Safety, Rehabilitation and Compensation and Other
Legislation Amendment Bill 2006 argued that it is important for a
test of employment contribution to the development or aggravation
of a disease to be based on an element of proportional
responsibility.(30) It was felt that the lack of
proportionality in the proposed amendment will mean that in
situations where work contributes to an injury, but is not the
primary cause, then it would be unfair for the workplace to escape
liability altogether. The concept of proportional responsibility
would not be that hard to apply as it is a common approach in car
insurance schemes.

The non-exhaustive list of factors that may be
used to determine the contribution made by the employee s
employment to the development or aggravation of an ailment
especially factors (c) and (e) - may represent a concerning erosion
of what is known as the egg shell skull rule .

The egg shell skull rule is a well established
doctrine in both criminal and tort law, and it means that a
defendant must take their victim as they find them .(31)
This makes a defendant liable for damage of an unforeseeable
extent, but not for unforeseeable damage of a different kind
.(32) Thus, when a person has a pre-existing
vulnerability or medical condition which makes them more
susceptible to an injury than an ordinary person, then the
defendant will be liable for all consequences resulting
from their activities leading to an injury to another
person.(33) This rule is based primarily on policy
grounds. It is not considered acceptable or satisfactory for the
defendant to rely on the victim's own vulnerability in order to
avoid liability.

The operation of the list contained in
subsection 5B(2) combined with the requirement
that an employee s employment make a substantially more
than material contribution to the aggravation of a
pre-existing ailment, may make it more difficult for a person with
a pre-existing ailment to make out a successful claim.

Section 6 of the SRC Act lists the
circumstances in which an injury may be treated as having arisen
out of, or in the course of an employee s employment. In 1988, the
Labor Government extended coverage of the workers compensation
scheme to include injuries sustained during ordinary recesses (e.g.
lunch breaks) and also injuries which occurred travelling to and
from the workplace.

The amendments made by item
12 are informed by the reasoning of the Productivity
Commission s report. In this case, injuries that are sustained
while an employee is temporarily absent from the workplace during
an ordinary recess in employment will no longer be injuries arising
out of, or in the course of, employment. This is reflected in
new paragraphs s6(1)(b) and s6(1)(c). However, an
employee will continue to be covered by the SRC Act
for:

Section 6(1)

(b) Injuries incurred while an employee was at the
employee s place of work, including during an ordinary recess, for
the purposes of that employment; and - new paragraph 6(1)(b)

(c) Injuries incurred by an employee while the
employee is temporarily absent from his or her workplace
undertaking an activity associated with their employment or at the
direction or request of the employer; or - new paragraph
6(1)(c)

(d) Injuries incurred by an employee while the
employee was, at the direction or request of the Commonwealth or a
licensee, travelling for the purpose of that employment; or

(e) Injuries incurred by an employee while the
employee was at a place of education, except while on leave without
pay, in accordance with:

(i) a condition of the employee s employment by
the Commonwealth or a licensee; or

(ii) a request or direction of the Commonwealth or
a licensee; or

(iii) the approval of the Commonwealth or a
licensee; or

(f) while the employee was at a place for the
purpose of:

(i) obtaining a medical certificate for the
purposes of this Act; or

(ii) receiving medical treatment for an injury;
or

(iii) undergoing a rehabilitation program provided
under this

Act; or

(iv) receiving a payment of compensation under
this Act; or

(v) undergoing a medical examination or
rehabilitation assessment in accordance with a requirement made
under this Act; or

(vi) receiving money due to the employee under the
terms of his or her employment, being money that is available, or
reasonably expected by the employee to be available, for collection
at that place.

The Productivity Commission also recommended
that coverage for journeys to and from work not be provided, on the
basis of lack of employer control, availability of alternative
cover in most instances and the ability to be dealt with under
enterprise bargaining.(35) Once again, the Government
supported these recommendations. The Productivity Commission s
report also pointed out that such an approach was in conformity
with the approach to such claims in jurisdictions such as Victoria,
Western Australia, South Australia and Tasmania.(36)
However, it is unclear as to why emphasis was placed on these
states as model templates as opposed to states which do allow for
journey claims and perhaps also of significance, is the fact that
the state schemes are not designed to operate beneficially whereas
the Comcare scheme is.

New subsection 6(2) makes it
clear that for the purposes of paragraph 1(d), travel between the
employee s residence and the employee s usual place of work is
taken not to be at the direction or request of the employer.

Also, reference to the employee travelling in
paragraph 1(d) does not include a reference to travelling to or
from a place mentioned in paragraph 1(e) or (f).

The ACTU has raised the but for test as an
objection to the restriction of coverage for injuries which occur
travelling to and from the work place, and also during work recess
breaks.

Workers only travel to and from work, or only have
recess breaks because of a direct connection with their work and as
such these situations should be adequately covered by workers
compensation legislation.(37)

Furthermore, the ACTU argue that the removal
of this coverage merely represents unnecessary cost shifting from
Comcare to either the individual, private insurance companies who
offer third party coverage, Medicare, and or Centrelink.

The Communications Electrical and Plumbing
Union have added that:

Workers Compensation is beneficial legislation
with an underlying premise of "no fault". Arguments to exclude
compensation on the basis that the employer has no control or fully
complies introduces concepts which if extended would exclude many
compensable claims and undermine the whole social framework of
workers compensation legislation.(38)

Section 19 of the SRC Act provides a method
for calculating weekly compensation of an incapacitated employee.
The basis for all calculations under s.19 of the SRC Act is a
determination of the employee's Normal Weekly Earnings ( NWE ). NWE
is defined in s.8 of the SRC Act.

Subsections 8(6) and 8(7), 8(9) and
8(9A) of the SRC Act provide for an increase to the
employee's NWE where the employee's weekly earnings would have
increased as a result of age, time of service, increment in salary
or promotion. This increase only applies to persons who remain
employees of the Commonwealth. These provisions were designed to
apply principally to wage increases that occurred either through
promotion and/or general wage rises. General wage increases are
typically applied to a clearly stated and easily identifiable class
of employees, thus the wage increase applied to a particular
employee is readily ascertainable, especially if they remained in
Commonwealth employment. With recent changes to the industrial
relations system and the trend toward wages being predominantly
enterprise or individually based, these subsections have
increasingly lost their relevance.

New subsections 8(9E), 9(F) and
(9G) proposed in the Bill enable a current employee s NWE
to be updated by reference to a prescribed index, where the NWE is
not capable of being updated under the existing provisions of
section 8.

According to the Explanatory Memorandum to the
Bill:

The indexation date has been identified as 1 July
following the date on which the Act receives the Royal Assent. The
index is applicable over the one year ending on 31 December
preceding each indexation date. Regulations may specify the manner
in which the increase is calculated by reference to the prescribed
index.(39)

Operating as a gateway section, section 16 of
the SRC Act does not contain the requirement for liability found
under section 14 of the Act.(40) Thus irrespective of
whether an injury suffered by an employee results in death,
incapacity for work, or impairment; where a person was an employee
at the time they suffered a compensable injury and are able to
provide receipts/evidence of their expenditure, Comcare is liable
to pay for the cost of the medical treatment obtained in relation
to the injury (being treatment that was reasonable for the employee
to obtain in the circumstances) compensation of such an amount as
Comcare determines is appropriate to that medical treatment -
s16(1)(41)

Subsection 16(4)(a) provides that the amount
payable by Comcare under subsection 16(1) is payable to, or in
accordance with, the directions of the employee. In practice, most
of the medical accounts are lodged directly with Comcare by the
actual providers of the medical treatment in the expectation that
they will be paid but without any direction from the employee.

The amendments made by items 17 and
18 will mean that:

If the employee has already paid the account, then at the
direction of the employee, the employee may be directly reimbursed
for the cost of that medical treatment amended
16(4)(a). At present, where an employee has directly paid
for the medical treatment, then in order to be reimbursed, the
employee must have the transaction reversed. The medical provider
must then re-generate that original invoice, send it to Comcare and
wait for payment. This process can take some time.

If the cost of the treatment has not been paid for by the
employee, then Comcare may pay the provider of the medical
treatment directly, without having to obtain a direction from the
employee new paragraph 16(4)(c)

Section 18 of the SRC Act provides that the
maximum amount payable for a deceased person s funeral is $3,500.
Despite the fact that section 13 of the SRC Act provides for annual
adjustment of funeral benefits in line with the Consumer Price
Index, these adjustments have failed to keep pace with the actual
increases in funeral costs.

The proposed amendments would increase the
maximum lump sum amount of compensation for a funeral to be set at
$9,000 and a new paragraph 18(4)(b) will operate
to permit the maximum amount of funeral benefit payable to be
increased by way of regulation in the event that the indexation
adjustments fail to keep pace with real costs. The
regulation-making power is designed only to operate
beneficially.

Where an employee is in receiving
superannuation benefits, sections 20, 21 and 21A
of the SRC Act currently operate to reduce the weekly amount of
compensation benefits accordingly. These subsections apply to an
employee who, being incapacitated for work retires voluntarily, or
is compulsorily retired .

In the 2005 Federal Court decision of
Lonergan v Comcare, Heery J held that the words being
incapacitated had a present tense and so required that the
incapacity for work had to exist at the same point in time as the
retirement .

The implication of this reasoning was that an
employee who was incapacitated for work on the day before or after
their retirement (but not on the actual day of their retirement)
was able to receive incapacity payments unaffected by any
superannuation entitlement. In contrast, an employee who was
incapacitated on the day of their retirement would have their
incapacity payments reduced according to their superannuation
entitlement.

The amendments clarify that regardless of the
date of incapacity, incapacity payments will be reduced according
to superannuation entitlements.

Items 22,
24, 26 and 27
repeal previous provisions in the SRC Act, under which a person s
compensation payments were calculated when they also receive either
a superannuation pension or a lump sum. The same provisions insert
new formula for calculation of a person s compensation payments in
the same circumstances.

Item 22 repeals current
subsection 20(3) of the Act and inserts a new
provision. The current formula allows the amount of weekly
compensation to be reduced by the sum of the Superannuation amount
plus the superannuation contribution that the employee would have
been required to pay if they were still contributing to a
superannuation scheme.

Commonwealth public servants currently may be
members of at least four separate schemes.(42) Members
of two of these schemes are required to contribute a set amount
from their after tax income, specifically:

for the Commonwealth Superannuation Scheme (CSS) 5 per cent of
the employee s gross wage, and

for the Public Sector Superannuation Scheme(PSS) at least 2 per
cent of the employee s gross wage plus allowances.

The above amounts are the minimum required
amounts that have to be paid by a Commonwealth public sector
employee who is a member of these schemes. Commonwealth public
servants who are members of the other two schemes are not required
to make a contribution to these schemes.

The new formula inserted by item
22 requires that the weekly compensation payment be
reduced by the above mentioned superannuation amount plus 5 per
cent of the employee s normal weekly earnings.

Potentially, this new subsection will reduce
the amount of weekly compensation payments made, compared to what
would have been under the currently formula, for members of the PSS
at the time the provisions of the Act applied to them. This outcome
occurs because the required 2 per cent of a person s wages and
allowances (that is the minimum contribution to the PSS) is likely
to be lower than the 5 per cent of the employee s normal weekly
earnings that will be deducted from the person s weekly
compensation payments under the proposed amendment.(43)
This point also applies to the amendments proposed by Items
24 and 26 (see below).

Item 24 repeals current
subsection 21(3) of the Act and substitutes a new
subsection. This provision calculates the person s weekly
compensation amount in circumstances where that person had received
a superannuation lump sum. The amount of weekly compensation is to
be reduced by an amount of deemed interest earnings of that lump
sum.

The current subsection 21(3)
assumes that the rate of weekly interest is effectively equal to 10
per cent per annum. The proposed amendment allows this interest
rate to be specified by the Minister for Employment and Workplace
Relations by way of a legislative instrument under proposed
subsection 21(5). Under this latter subsection the
interest rate for these purposes would be determined once a year
and would take effect on 1 July following the making of the
relevant legislative instrument.

As noted above, the current subsection
21(3) sets this rate of interest at 10 per cent per annum.
This provision has been criticised as being too high, and not
reflecting the overall rate of return that has been achieved by
managed investments in the past. This criticism appears justified
when the average investment performance of tax advantaged
investments, such superannuation funds, is compared with this
notional rate of return. As at 30 June 2006 the average balanced
superannuation fund return per annum, over the preceding 10 years,
was about 8.8 per cent per annum. Between 1974 and 2006 the average
return for a balanced superannuation fund, over the preceding 10
years in each year, varied from 5.9 to 16.4 percent per
annum.(44) Giving the Minister for Employment and
Workplace Relations the power to determine this interest rate may
lead to more equitable outcomes by allowing that Minister to adjust
the interest rate for these purposes in line with recent rates of
return achieved by investment markets.

The Commonwealth already sets deemed interest
rates for social security purposes. The Minister for Family and
Community Services and Indigenous Affairs determines what the
deemed rate of investment earnings will be for assets held by
recipients of social security pensions and benefits.(45)
It has been suggested that the social security deeming rates be
used instead of a rate determined by the Minister for Employment
and Workplace Relations.

The social security deeming rates are in fact
two separate rates. If a person (or a couple) have financial assets
below a certain level (currently $38 400 for a single and $63 800
couple) a lower deeming rate is applied to these assets (currently
3.5 per cent p.a.). Financial assets above these thresholds are
deemed to earn a higher interest rate (currently 5.5 per cent per
annum).(46) Applying this particular arrangement to the
superannuation amounts received by those also receiving weekly
compensation payments would be administratively complex. However,
the overall approach in setting the social security deeming rates
may have been adopted in the policy behind the amendments to
subsection 21(3) of the Act.

The above mentioned social security deeming
rates are changed to reflect changes in investment market rates of
return, but they are not set at those levels. Rather, they are set
at a level that is below what could be reasonably achieved by
investing in various investment markets. This approach was
undertaken to:

allow social security pensioners to invest their funds in very
conservative investments, such as special deeming bank accounts,
that pay the deemed rates of return, and

to encourage the placement of financial assets in investment
products that have a reasonable prospect of rates of return higher
than the social security deeming rates.

As originally enacted in 1988, subsections
37(1) and (2) provided the option for an employer to use a
departmental officer (case manager) in order to develop and provide
an internal rehabilitation program. This provided the opportunity
for cost savings. If however the case manager thought that an
external rehabilitation provider was (more) appropriate, then the
provider chosen needed to be a Comcare approved provider.

Under the present SRC Act (as amended in
2001), subsection 37(2) does not permit a departmental case manager
to develop and/or deliver an internal rehabilitation program.

The proposed new subsection
37(1) would enable a rehabilitation authority to make a
determination about whether an employee should undertake a
rehabilitation program. And the proposed new subsection
37(2) provides that where a rehabilitation authority has
made a decision that an employee should undertake a rehabilitation
program, then they may either provide the rehabilitation program
themselves, or use an external Comcare approved rehabilitation
provider to provide the program. Thus the amendments reinstate the
original provisions in the Act.

Subsection 48(3) of the SRC Act provides that
where an employee recovers damages in respect of a compensable
injury and, prior to recovering those damages, received
compensation under the Act; then the employee is liable to pay
Comcare an amount equal to the amount of that compensation or the
amount of the damages received, whichever is less.

The drafting of this provision makes reference
to the compensation recoverable as being any compensation
under this Act [that] was paid to the employee in respect of
the injury, loss or damage .

The proposed amendment clarifies that Comcare
is able to recover all medical expenses paid directly to
medical service providers under amended section 16. This is
basically in line with the decision of the Federal Court in
Comcare v Fyfe (1999). In that case, the applicant argued
that paid to the employee excluded payments made to third parties
(eg. for medical expenses) and only applied to payments made
directly to the employee. This was rejected by the Court.

Overall the proposed amendments are likely to
result in a significant pool of savings as indicated by the
financial impact statement. However, care must be taken to ensure
that this does not unduly and unnecessarily occur at the expense of
denying genuine claims and thus weakening the beneficial nature of
the scheme. Hence, it seems that a few of the proposed amendments
may require a rethink with corresponding safeguards.

Hon. Kevin Andrews (Minister for Employment
and Workplace Relations and Minister Assisting the Prime Minister
for the Public Service), Second Reading Speech: Safety,
Rehabilitation and Compensation and Other Legislation Amendment
Bill 2006 , 7 December 2006.

Hon. Kevin Andrews (Minister for Employment
and Workplace Relations and Minister Assisting the Prime Minister
for the Public Service), First Reading Speech: Safety,
Rehabilitation and Compensation and Other Legislation Amendment
Bill 2006 , 30 November 2006.

(i) the employee s age, experience, training, language and
other skills
(ii) the employee s suitability for rehabilitation or vocational
training
(iii) where the employee is available in a place that would require
the employee to change his or her place of residence whether it is
reasonable to expect the employee to change his or her place of
residence
(iv) any other relevant matter

Comcare and Chenhall (1996) AATA
6491.

Re Pulitano and Telstra Corporation
Limited (1996) AATA 11397.

Explanatory Memorandum, p.3.

Frosch v Comcare [2004] FCA
1642.

Commonwealth v Pisani (1987) 12 ALD
299.

Higgins v Galibal Pty Ltd
(1998).

Welsford and Commonwealth Banking
Corporation (1984) 5 ALN N570.

The five exclusory provisions which may
defeat a claim for compensation are:

An injury arising out of reasonable disciplinary action -
s4(1).

An injury arising out of the failure to obtain a promotion,
transfer or benefit - s4(1).

Intentionally self inflicted injuries - s14(2).

Injury caused by serious and wilful misconduct - s14 (3).

Wilful and False Representation - s7(7).

Subsection 4(1) SRC Act.

Law Council of Australia, Submission
19, p. 4. Senate Inquiry into the Safety, Rehabilitation and
Compensation and Other Legislation Amendment Bill 2006.

Productivity Commission Inquiry Report,
National Workers Compensation and Occupational Health and Safety
Frameworks 16 March 2004, p.179. For example, in Victoria
and Queensland, an employee s employment must be a significant
contributing factor for a disease to be compensable. In Western
Australia, employment must be a contributing factor and contribute
to a significant degree . In Tasmania and the Australian Capital
Territory, employment must be a substantial contributing factor
.

Section 14 makes Comcare liable to pay
compensation in respect of a compensable injury suffered by an
employee if the injury results in death, incapacity for work or
impairment.

Leesv Comcare (1999) FCA
753.

The four schemes are: the Commonwealth
Superannuation Scheme, the Public Sector Superannuation Scheme, the
Public Sector Superannuation Scheme Accumulation Plan and if the
employee is ineligible for membership of these schemes the
Australian Government Employees Superannuation Trust. Members of
the latter two schemes may choose to be members of other complying
superannuation funds.

A person would have to be receiving an
unusually large allowance in the week that they ceased employment
for the minimum required contributions under the PSS to be higher
than 5 per cent of their normal weekly earnings. A balanced
superannuation fund invests in a broad range of asset classes such
as property, equities and fixed interest.

This paper has been prepared to support the work of the
Australian Parliament using information available at the time of
production. The views expressed do not reflect an official position
of the Parliamentary Library, nor do they constitute professional
legal opinion.

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